I use the command line upgrade each time a new version is released for WAB. The only thing to remember is that you need to launch the command line window with elevated privileges (Run As Administrator).

Question: Is it an absolute requirement to have WebAppBuilder run inside the directory that it is extracted into? How do you manage your git repo if this is the case since the repo has to be created in an empty directory?

If you were following the upgrade documentation then you likely saw that the command line syntax listed in the help for the old version states, "Your previous version of the Web AppBuilder installation directory is similar to C:\arcgis-web-appbuilder-1.0". If you use this path you will receive the invalid path error. Try using C:\arcgis-web-appbuilder-2.7\WebAppBuilderForArcGIS instead.